Accounting Important Problems

Accounting Important Problems

Problem #1 – Lump sum
issuance of stock. Parker Corporation has issued 4,000 shares of common stock
and 800 shares of preferred stock for a lump sum of $148,000 cash. Instructions
(a) Give the entry for the issuance assuming the par value of the common stock was $5 and the fair value
$30, and the par value of the preferred stock was $40 and the fair value $50.
(Each valuation is on a per share basis and there are ready markets for each
stock.) (b) Give the entry for the issuance assuming the same facts as
(a) above except the preferred stock has no
ready market and the common stock has a fair value of $24 per share.

Problem #2 – Treasury
stock. Agler Corporation’s balance sheet reported the following: Capital stock
outstanding, 5,000 shares, par $30 per share
$150,000 Paid-in capital in excess of par 80,000
Retained earnings 100,000 The following transactions occurred this year: (a)
Purchased 400 shares of capital stock to be held as treasury stock, paying $50
per share. (b) Sold 150 of the shares of treasury stock
at $70 per share. (c) Sold the remaining shares
of treasury stock at $55 per share. Instructions A. Prepare the journal entry
for these transactions under the cost method of accounting for treasury stock.
B. Prepare the Stockholder’s Equity Section of the Balance Sheet.

Problem
#3 – Basic and diluted EPS. Assume that the following data relative to Kane
Company for 2015 is available: Net Income $5,600,000 Transactions in Common
Shares Change Cumulative Jan. 1, 2015, Beginning number 700,000 Mar. 1, 2015,
Purchase of treasury shares (60,000) 640,000 June 1, 2015,
Stock split 2-1 640,000 1,280,000 Nov. 1, 2015, Issuance of shares 240,000
1,520,000 8% Cumulative Convertible Preferred Stock Sold at par, convertible
into 200,000 shares of common (adjusted for split). $1,000,000
Instructions (a) Compute the basic earnings per
share for 2015. (Round to the nearest penny.) (b) Compute the diluted earnings
per share for 2015. (Round to the nearest penny.) Problem #4 – Trading equity
securities. Korman Company has the following securities in its portfolio of trading securities on December 31,
2014: Cost Fair Value 5,000 shares of Thomas Corp., Common $151,000 $139,000
10,000 shares of Gant, Common 182,000 190,000 $333,000 $329,000 All of the
securities had been purchased in 2014. In 2015, Korman completed the following securities transactions: March
1 Sold 5,000 shares of Thomas Corp., Common @ $31 April 1 Bought 1,200 shares
of Werth Stores, Common @ $45 The Korman Company portfolio of trading
securities appeared as follows on December 31, 2015:
Cost Fair Value 10,000 shares of Gant, Common
$182,000 $195,500 1,200 shares of Werth Stores, Common 54,000 51,500 $236,000
$247,000 Instructions Prepare the general journal entries for Korman Company
for: (a) the 2014 adjusting entry. (b) the sale of the
Thomas Corp. stock. (c) the purchase of the
Werth Stores’ stock. (d) the 2015 adjusting entry. Problem #5 – Interperiod tax
allocation with change in enacted tax rates. Murphy Company purchased equipment
for $300,000 on January 2, 2014, its first day of operations.
For book purposes, the equipment will be
depreciated using the straight-line method over three years with no salvage
value. Pretax financial income and taxable income are as follows: 2014 2015
2016 Pretax financial income $194,000 $260,000 $330,000 Taxable income 224,000 260,000 300,000 The temporary
difference between pretax financial income and taxable income is due to the use
of accelerated depreciation for tax purposes. Instructions (a) Prepare the
journal entries to record income taxes for all three years(expense, deferrals,
and liabilities) assuming that the enacted tax rate applicable to all three
years is 30%.


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